Subscribe to our mailing list

* indicates required

Email Address *

First Name

The Cost Of Click Fraud

Posted on May 25, 2005

By Stan Hauser

One of the biggest threats to the continued growth of Search Advertising is the
increasing plague of click fraud. Although there are varying forms of click
fraud, most people define it as any click generated, and paid for, where the
intent is to drain the advertiser's budget. Advertisers know some clicks are
more qualified than others, and not every visitor from their PPC campaigns will
convert to a customer. But, they have a right to expect that the traffic they
are paying for is coming from people at least marginally interested in their
products or services.

What Motivates Click Fraud?

Why does click fraud exist? What motivates people to deceive the system by
sending PPC advertisers bogus traffic? The short answer (as usual) is money.

Many Pay Per Click Advertising networks are partially, (or in some cases
totally), dependent on affiliate sites to generate traffic for their
advertisers. These networks syndicate their customer's ads so they will appear
on the sites of their affiliates. Every time someone clicks on an ad the PPC
Network and the affiliate site share the revenue. The more clicks the affiliate
site generates, the more money it makes. While the vast majority of affiliates
are legitimate trustworthy sites, others are in the business of exploiting
loopholes in the system to line their pockets with real money by generating fake
clicks. Often times the weapon of choice used by these rogue sites to cheat the
system is a software script that automatically clicks on PPC ads.

Another variation of click fraud uses a more personal touch to steal
advertiser's money. In the hyper-competitive world of Pay Per Click Advertising
the battle for premium positioning at an affordable cost can cause companies to
use less than ethical techniques to gain an edge. Companies can drive up their
competitor's marketing costs by clicking on their Pay Per Click ads. If their
competitor's marketing costs get too high they may lower the bids on their
keywords, or stop bidding on the word altogether. Either way, the cost for the
word goes down, giving the fraudulent company an opportunity to increase their
ranking on the page at a lower cost.

The Search Engine's Response To Click Fraud.

All the Pay Per Click Search engines have systems in place to detect click
fraud, and screen questionable clicks. One example of how they do this is by
keying in on the IP address where the click originated from. If they see too
many clicks coming form the same IP in a short period of time they will often
screen the traffic.

The Search Engines are in a unique position when it comes to Click Fraud. On the
one hand they benefit from it. The amount of revenue attributed to Click Fraud
varies depending on who you ask, but everyone agrees that if illegitimate clicks
were completely eliminated, all the major Search Engines would suffer a
significant hit to their revenues and stock prices. However, the Search Engines
also realize that the long term health of the industry depends on establishing
trust with their advertiser base. Going forward we can expect to see Search
Engines deploy increasingly sophisticated methods to eliminate fraud, and
corresponding responses from the dark side of the Search Advertising industry.

Decreasing The Amount Of Click Fraud For Your Campaigns.

While it's impossible to completely eliminate fraudulent traffic, there are some
things you can do to increase the percentage of good traffic from your
investment in Pay per Click Advertising.

As a rule of thumb, the more a Pay Per Click Ad network depends on affiliates
for its traffic, the more susceptible it will be to fraud. The reason why the
overall traffic quality is better on Google, Yahoo and Lycos is that each of
these sites has their own branded destination where consumers go to search. If
you advertise on these sites you know where your ads will appear (although even
these bigger sites use affiliates to varying degrees). Once you venture into the
second tier Pay Per Click networks however you'll find that almost all of their
traffic is generated through partner sites. Companies like Kanoodle, Enhance
etc...don't own sites where people go to search the web. Nearly all their traffic
is generated through their affiliates which makes it more difficult to control
fraud.

Conclusion:

Unfortunately, click fraud is a necessary evil of Pay Per Click Advertising, at
least for now. However, as with most aspects of PPC Advertising everything
eventually boils down to conversions and profits. If your campaigns are
generating enough quality traffic to meet your conversion metrics you should
continue to invest in the campaign, even if some of the clicks are fake. If your
traffic is riddled with too many automated clicks it will eventually become
obvious in your conversion numbers, and you should stop the campaign and put
your money into pay Per Click networks that control more of their own traffic.